Optimal maintenance and pricing strategy for a periodic review production system with fixed maintenance costs and limited maintenance capacity

Abstract

In recent times, the escalating complexity of advanced production systems has led to increased exposure to various uncertainties, which impact systems' reliability. To maintain the reliability of systems, reduce maintenance costs and increase revenues, we establish an effective joint optimal maintenance and pricing strategy for a periodic review production system, which is of practical importance. Compared with the existing literature, we make a contribution to considering limited maintenance capacity and fixed maintenance costs simultaneously, and developing joint optimal maintenance and pricing strategies. We initially construct a dynamic programming model for this problem, and prove the objective function is strong CK-concave. We then show that the optimal maintenance strategy is partially characterized by two thresholds, and the optimal pricing strategy depends on the optimal number of operational machines after repairs. Numerical results show that the optimal maintenance and pricing strategy is quite robust, and is not much affected by various parameters.